Can you profit more from buying options or investing in stocks?

Generally speaking you CAN profit more by trading options. But only if you have the knowledge/skill to do it. The overwhelming majority of options traders lose money - about 85 to 90%. Stay away unless you know what you are doing. Good Luck!

It depends. Options are contracts which allows you to buy or sell stock at a certain price within a certain time frame. They are less expensive than stocks, but usually expire worthless. 90% of people who trade options lose money. With options, you are paying a time premium. If the stock rises or falls significanly within that time period, you could make a lot of money. If the stock doesn't go your way, you've likely lost your whole investment.

Buying short term stocks or options is usually a losing bet, but if you're looking for the fastest way to either make a lot of money, or lose everything, options may be the way to go.

The main advantage in buying or selling options is the low capital outlay. You can make more by using options, but it's much riskier overall.

Roughly speaking, with the same capital, you can make 10 times more profit from options than from stocks. But your risk is also also 10 times higher.

Unfortunately in the business world there is no such thing as a free lunch.

Being an economist, you should that you do not profit from buying options, ONLY FROM SELLING THEM.

Before you make such a decision you must first 1. DO YOUR HOMEWORK 2. Figure out your risk tolerance and 3. Figure out the amount of money you are willing to potentially loose.

Homework time:
Stock options are a contract to buy or sell (call / put) a specific stock at a specified price on a certain date. Frankly, you are making an educated guess (betting) on which way the stock price will move. Make the wrong bet, you could potentially loose all of your investment if you are buying the stock (call) or have unlimited loss if you are selling the stock (uncovered put) if you do not own the actual stock you are selling.

Terms you should research and know:
Covered call / uncovered call
Covered put / uncovered put
Spreads
Butterflies
Straddles
And this is just the basics... (a good book on options trading could help you a lot **suggestions anyone?**)

Statically speaking stocks are less risky then options, and thus earn less potential returns. But this does not mean that they are without their own risks. Everything from company valuation, sector specific risks, to political risks determines if an individual stock will be profitable. Once again HOMEWORK.

Mutual Funds tend to be the best bet for most investors. You will not see the huge returns realized with the correct individual stock holdings or option trading, but it will protect some of your losses in a downward market. This is done by investing in many stock issues rather then just 1 company.

Just remember these key points
Only invest an amount of money in *risky investments* that you are willing to loose.
Always know you own personal risk tolerance. What might be the perfect investment for one person could be an extremely risky investment for someone else.
Always keep in the back of your mind that Academic studies have shown that over 90% of a portfolio's performance is due to having the correct asset mix. This means you must correctly allocate how much of your assets should be in each style of investment. I.e. stocks, bonds, cash, commodities, etc. In other words, for long term growth you must have a diversified portfolio.

I hope this information helps. If you have other questions just PM me. I whish you good luck, in which ever investment you decide to invest in.

You can profit from buying them, if you can predict the direction the stock price will take in a specified amount of time. I have made thousands of dollars investing in stock options, but I also have to do research on the underlying stock.

Generally speaking, the more profit potential, the higher the risk. You can make more from investing in options, but you can also lose more. When deciding how to invest your money, you have to determine how risk averse you are.

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